Residential HVAC Systems

[GWh of Electricity Saved:]

272K

[Jobs Impact:]

Low

Medium

High

[Budget Impact:]

Low

Medium

High

[Conventional Pollutants Reduced:]

SO2

35,667 tons

NOx

29,442 tons

Hg

.479 tons

PM

5,468 tons

[Megatons of GHG Reduced:]

260.9

Overview

Across the United States, space heating and cooling account for 43% of residential energy use,1 consuming 2.7 million GWh of energy.2 Although improving the building shell can have a dramatic impact on heating and cooling needs,3 the type of heating, ventilation, and air conditioning system (HVAC) is an important factor in home efficiency. With greater consumer education and accessibility to efficient equipment, energy used in residential climate control could be reduced by more than 250,000 GWh,4 the amount of energy used by homes in Arkansas, Kansas, and Kentucky combined.5

Analysis

Buying a new heating or cooling system is a daunting task for consumers– it’s both expensive and confusing.6 Even with the EnergyGuide label,7 it’s not clear which system will work best in a particular situation, as performance varies from house to house.8 To ensure comfort, most HVAC systems are oversized wasting both energy and money.9 Even after installation, most consumers don’t know whether they made the most cost effective decision.10

Additional hurdles to obtaining efficient systems stem from manufacturer and distributor practice. HVAC systems must meet minimum efficiency standards set by DOE.11 Manufacturers can also choose to participate in the voluntary Energy Star program,12 but they have little incentive to reach beyond these targets.

Distributors stock only a subset of the available products, limited by the high cost of these items.13 Moreover, roughly a third of HVAC replacement decisions are made under duress, when the homeowner’s current system fails.14 This leaves many consumers without time to fully evaluate their options and identify the distributor with the more efficient product.

Implementation

To overcome information and distribution barriers, the federal government should implement a number of policies.

Improve Appliance Standards

Appliance standards have saved consumers more than $300 billion since 1987.15 Congress should direct DOE to update the minimum efficiency standards for residential HVAC systems, which are included in the bipartisan National Consensus Appliance Agreements Act of 2011.16 This would eliminate costly and confusing conflicts between different state standards, reduce manufacturing costs and could save up to 350,000 GWh of energy.17

Create a Best-In-Class Deployment Program

To encourage production and deployment of “Best-in-Class” HVAC options, Congress should create an incentive program for HVAC distributors. This incentive program would target the least efficient currently deployed systems, providing a direct rebate for replacing them with the most efficient currently available equipment.18 Benefitting the more than 1 million workers in the U.S. HVAC industry,19 this would let the private sector find a solution to our efficiency gap. Further, by creating demand for “Best-in-Class” systems, manufacturers will be encouraged to commit more resources to R&D 20 raising the efficiency of all options. If 5% of the least efficient home HVAC systems were replaced with highly efficient models, it would save more than 25,000 GWh of energy.21

Form a Sizing Assistance Fund

Congress should create a grant program for states to create a residential HVAC advisory program. This 3rd party service would provide customers with personalized recommendations on the size of the HVAC system they need, with no financial incentive to upsell larger models.22 Distributors and installers would have an additional check on their recommendations, protecting customers from higher costs and reducing confusion in the buying process. Utilities would also benefit from the decrease in energy demand, mitigating the need for building expensive peaking power plants.23

For Third Way analysis, full possible amount was discounted by 50% to account for imperfections in systems, slow turnover and the efficiency rebound effect; the full 1.2 quads or 350,000 GWh of energy is based on: “The Implementation of National Consensus Appliance Agreements Act (INCAAA) (S.3295),” Fact Sheet, American Council for an Energy-Efficient Economy, November 17, 2010. Accessed June 18, 2013. Available at: http://ase.org/sites/default/files/INCAAA%20fact%20sheet%2011.17.2010.pdf.

Currently, the HVAC industry only spends 1.7% of revenues on R&D, below that of other industries. See “Towards a Climate-Friendly Built Environment,” p. 55.

Analysis based on replacing 5% of lowest performing HVAC systems with models in the top 10% of performance, based on data pulled from the Building Energy Databook. See“2011 Buildings Energy Data Book,” Chapter 2. Available at: http://buildingsdatabook.eren.doe.gov/ChapterIntro2.aspx.

Implementation

How to Use the PowerBook

The PowerBook is a menu of á la carte options, not a blueprint that requires every element to hold it together. It is designed to provide federal policymakers and regulators with a selection of policy ideas to help solve specific challenges in how our nation produces, transports, and consumes energy.

SECTORS

The PowerBook is divided into five economic sectors: power, transmission, buildings and efficiency, industry, and transportation. Each sector includes multiple components, which are specific elements of that sector that require some policy change. Components that impact multiple sectors, such as clean energy finance or regulatory reform, are included in a sixth cross-sector section.

COMPONENTS

Each component has three parts: a short overview, an analysis of the challenges and opportunities for energy, employment, and the environment, and an implementation section that outlines specific actions that Congress, the administration, or the independent regulatory agencies can take. The policy recommendations in the implementation section are intended to serve as frameworks for more detailed legislation or regulatory reform proposals.

The components in the PowerBook reflect the input from a broad group of business leaders, policymakers, analysts, and academics. We will update them regularly to add new policy ideas, revise existing proposals, and reflect progress made in Congress or through the regulatory process. We invite readers to provide us suggestions to build upon the proposals in our components or new policies we should consider adding. Please send us your comments via the contact page.

OUR ANALYSIS

The PowerBook provides both pragmatic ideas to move America toward cleaner energy and data showing the potential impacts that these policies could have on our energy systems and economy. By combining several datasets, from economy-wide to industry-specific, we have developed a basic methodology for each component to estimate the effects these policies would have on CO2, conventional pollutants, and domestic energy needs. While future, independent modeling will provide higher accuracy, the current metrics offer a general barometer of impact and a way to compare the effects of various components.